Friday, September 7, 2012

ECB buys Bonds, Bulls Buy Stocks

Meltup Edition

·         A few blog posts back, I was under a mulled state of unconsciousness as I pondered my next move on the toppish consolidation of world indices. Whilst most perception seemed to indicate a selloff was likely; I had thought the uptrend would continue. Today proved to the be the move that confirmed this hypothesis. However, my portfolio moves were somewhat more focused on risk management, as I offloaded my positions in the EURO indices, KBH and FMG reducing my overall leverage from 1.44 to 1.2. This is proving to be quite costly on my performance.

·         Australia continues lagging the US counterparts, as the China cyclical downshifts are weighing in on the miners.

·         Yesterday purchased some SDL - really simple takeover play - Hanlong has put in a bid at 45c - after negotiating it down from 55c originally on both falling Chinese demand and iron ore prices. The board seems likely to accept the deal, and the shareholders are likely to follow suit given it's current market price of 28c. I was able to nab a batch at 27.5c. The implied odds are pricing for deal uncertainty; which seems purely from a shareholders voting perspective - looks like most of the regulatory hurdles from the Chinese govt. are now out of the way.

·         I went long some LULU puts two sessions ago, for a small position going into earnings which will be released Friday morning in the US trading session. I know I was somewhat weary given the positive outcomes for the sector names; the price retracement was too juicy to not take a punt on the continuation of the downtrend on a potential earnings catalyst surprise to the downside.

·         S500 is the only risk asset rising to new highs in 2012 - the other assets classes are showing continued uncertainty from investors.

·         ECB revealed further plans of bond buying last night.  . Euro is now testing the downtrend line that's been in place 2011 - the weekly chart below. If we see the key break above this line, we may see continued flow into risk assets.

·         With the big AMZN announcement regarding new Kindle devices being on the way but not defining what features it will have; Bezos continues the strategy of releasing upcoming product plans way before they are available, to potentially delay sales of upcoming new products from their own competitors.